ECO 303 Intermediate Microeconomics Theory Homework 3 Due date: 12:30 PM 04/04/2024 1. Let's consider a fixed amount of input k = 16. Find the short-run cost function when the wage w (price of labor () is 5 and the rental rate of capital r (price of capital k) is 4 for a firm whose production function is y = 40.2510.75 - 16 (short-run = welt r.k 4- 16 10.25 VS= 16 1= 16 K- 16 R - 4 KK = $4 (rentar ) 16 ( fixed (90, +1 ) 1= 64 T ( = w / t KT ( = W/ + 64 ( Sincew=$5) IC- SHORT( S8+CR TC - TC = 51+04 If 1 = 8 TC = 51+ 68 TC= S( 3) +64 to2 40 +68 TC = 104 Now in the long-run, the amount of capital could be chosen freely. What If 1- 8 is the long-run cost function with the same wage and rental rate? This The long run cost quaction with the same To Costamation Wase and rental rate is TC = Site x 20 is optimal MTC= sit rxk TC- 51 + 80 asit, minimizes TC - 51+ 4 xK The difference in the short run function TC:- 40 120 cost. TC- 120 and cong run function is the capital, as in the short run it is filled at 16. While the long fan is a variable and can be chosen freely